The property market in HCM City is at last showing signs of recovery. Foreign investors are looking to revive stalled projects, while locals are drawing up new plans or buying out foreign shares in stagnant joint ventures. Nguyen Hong reports.
Office lessors in HCM City, who were finding it hard to get customers to fill space during the recent real estate crisis, are now finding it increasingly difficult to find suitable space to offer potential tenants. Some of them are turning away customers because they simply have no free property available.
Ngo The Khai, deputy general director of high-rise office building Harbour View, says the building is 98% full after signing up Korean group LG for three years and leasing out two and a half floors to another party. Several companies, which previously rented villas or houses, have shifted to high-rises. BP Petco, for example, was previously headquartered in a small building in District 3 and now rents half of the third floor at Sun Wah Tower in District 1.
While the occupancy rates of Harbour View and Sun Wah have increased due to newcomers, in other buildings existing tenants are leasing additional space to expand their businesses. City View, where the rate is reported to have gone from 90% at the beginning of the year to 95% now for both office and residential components, is a case in point. Its deputy general director Nguyen Thai Son says several existing tenants, such as Malaysia-based granite maker White Horse, have rented more space to nearly fill the building. Like City View, the Parkland apartment building on the Hanoi Highway in District 2 has also seen a 5% rise in occupancy since the beginning of the year, in Parkland’s case from a base of 80%.
According to real estate consultancy company Chesterton Petty Vietnam, the residential market saw the average occupancy rate increase by 4% to 87% in the previous quarter. While land sales were slow, with city authorities’ tough speculation-preventing measures restricting land sales in certain categories, there was strong demand for legitimate houses and apartments for both owner occupation and investment purposes. “The market is definitely heating up,” commented Brett Ashton, HCM City branch director of Chesterton, which became the first wholly foreign-owned property consultant licensed in Vietnam when it opened its doors in 1998.
“We have met a number of investors new to Vietnam as well as several long-time investors seeking new opportunities in the real estate market. While some are looking to start afresh, others are seeking to buy foreign shares in stalled joint ventures. “This reflects the current potential for new investors to get involved in real estate without the problems experienced by past investors,” he said. “That means land clearance and compensation issues do not present themselves as a problem because most of the projects for sale have already been cleared and are ready for construction.”
In a bid to cash in on increasing demand for accommodation and office space, international investors have showed tentative signs of either restarting existing stalled projects or entering the market with completely new ones. German-backed Windhorst Land Development, for example, has recently returned to discuss with local partner Ben Thanh Corporation (Sunimex) the resumption of the long-delayed property project Ben Thanh-Windhorst.
The $45-million project, situated near Me Linh Square in District 1, is expected to resume construction by next July after adjustment of the project’s design and a new feasibility study is complete, says Nguyen Duc Than Xuan, planning manager of Ben Thanh Tourist Service Company, an affiliate of Sunimex.
The developer of the long-stalled HCM City Park Hyatt Saigon Hotel has also announced that construction is expected to restart soon. Licensed in 1994 under the name of Grand Imperial Saigon Hotel, the $44-million Park Hyatt Saigon Hotel project is a joint venture between Malaysia’s Radiant Investment Company, with a 51% stake, Hong Kong’s United Concord International, with 19%, and Saigon Architects & Engineering Company (Sageco), under HCM City People’s Committee, with 30%.
The 10-storey hotel, situated next to the Municipal Opera House in downtown District 1, was designed to offer 259 top-class rooms. “The project was put on hold over four years ago, but work will get going again by October this year,” confirms project director Nguyen Vinh Tran.
Meanwhile, successful local companies from a variety of industrial sectors are also moving towards property development by using cash from their core operations to invest in the property market. Binh Minh Import-Export Company (Bitexco), which also produces Vital mineral water and garments, is erecting a 21-storey office building for lease capitalised at $9.6 million, on Nguyen Hue Boulevard, District 1. Like Bitexco, Phuong Nam Bank, one of the country’s leading joint stock commercial banks, has announced plans to build a $3.3- million office tower in the second city. Half of the 11-storey office tower on Ly Thuong Kiet, District 11, is reserved for bank operations and the remainder for leasing.
The Refrigeration and Electrical Engineering Corporation (REE), one of the high-flyers on the local bourse, has recently opened e-Town, a 14-storey office building in Tan Binh District dedicated to info-tech tenants. Property consultants say the office market will continue to see a strong presence from local investors. However, most of these companies intend to invest in low-end office buildings as this market segment is considered the most beneficial in terms of rental growth and occupancy rates due to lack of supply and high demand.